A cryptocurrency exchange hack in South Korea jolted holders of digital assets, fuelling a $46 billion sell-off and extending this year’s Bitcoin slump to more than 50 per cent.
Over the weekend, crypto exchange Coinrail tweeted that it was hacked, and noted that lesser-known cryptocurrencies such as Pundi X were among those affected, according to Google Translate. The Pundi X-bitcoin pair is the most-traded on Coinrail, CoinMarketCap data showed.
Meanwhile, rival cryptocurrencies Ethereum and Ripple are both down over 10% today.
The latest blow comes as the Bitcoin price struggles to find a floor amid regulatory concerns, dwindling transactions, sky-high power consumption, and criticism from the world’s established financial industry.
The potential hack of Coinrail — which trades some 50 cryptocurrencies and is, just, in the world’s top 100 exchanges — is the latest high profile Bitcoin heist in recent months and will renew fears many have over Bitcoin’s safety as an investment and trading commodity.
While the potential Coinrail hack is unlikely to be on the same scale as either of last year’s breaches it will shake the confidence of many potential Bitcoin investors at a troubled time for cryptocurrencies.
Coinrail said it has accounted for 70% of its cryptocurrency reserves in a statement posted to its website. The exchange moves around $2.6 million each 24 hours, according to CoinMarketCap data.
Coinrail said it has frozen all exposed NPXS, NPER and ATX coins and other cryptocurrencies are now being kept in a cold wallet.
Most other major virtual currencies also slumped, sending the market value of digital assets tracked by Coinmarketcap.com to a nearly two-month low of $294bn. At the height of the global crypto-mania in early January, they were worth about $830bn.
Enthusiasm for virtual currencies has waned partly due to a string of cyber heists, including the nearly $500 million theft from Japanese exchange Coincheck in late January. While the latest hacking target – a South Korean venue called Coinrail – is much smaller, the news triggered knee-jerk selling by investors, according to Stephen Innes, head of Asia Pacific trading at Oanda in Singapore.
“This is ‘If it can happen to A, it can happen to B and it can happen to C,’ then people panic because someone is selling,” Mr Innes said.
The slump may have been exacerbated by low market liquidity during the weekend, he added.
“The markets are so thinly traded, primarily by retail accounts, that these guys can get really scared out of positions,” he said. “It actually doesn’t take a lot of money to move the market significantly.”
Governments around the world are beginning to act on Bitcoin and cryptocurrency regulations — something the market and Bitcoin evangelists view with caution.
Regulatory crackdowns and the US Securities and Exchange Commission’s Bitcoin price manipulation probe have knocked investor confidence in Bitcoin this year.
The SEC investigation, which Bloomberg reported last month, is the U.S.’s latest effort to crack down on the booming Bitcoin and cryptocurrency industry and will look into illegal practices that can influence prices.
On Friday the Wall Street Journal reported U.S. government investigators demanded several bitcoin exchanges hand over trading data, putting the price on the back foot ahead of today’s sell off.
Federal prosecutors are working with the U.S. financial regulator that oversees derivatives tied to Bitcoin, the Commodity Futures Trading Commission.
In March, Japan’s Financial Services Agency ordered two exchanges to halt operations for a month and penalized four others.